Expanding the AHCCCS rolls could be a financial bonanza for the state—but GOP lawmakers don't want to do it

Even though Arizona stands to gain billions of federal dollars by implementing the Affordable Care Act, the prognosis does not look good for expanding the state's AHCCCS program to include more low-income Arizonans.

Gov. Jan Brewer is still weighing whether to push for the expansion, but Republican lawmakers appear to have little appetite for expanding the health-care rolls. Senate President Andy Biggs, who sponsored legislation to eliminate AHCCCS altogether in 2011, has told the press than he opposes the expansion.

The question of whether to expand the Medicaid rolls (which in Arizona goes under the name of Arizona Health Care Cost Containment System, or AHCCCS) grew out of the federal Affordable Care Act, aka Obamacare.

As part of the health-care reform package, states have the option of expanding Medicaid coverage to anyone below 133 percent of the federal poverty level. (Originally, the legislation required that states expand the Medicaid coverage or lose federal Medicaid funding, but the Supreme Court ruled that the requirement was too coercive, so states now have the option of expanding coverage.)

The federal government is offering a pretty sweet deal to states that expand the coverage: It will cover nearly all of the cost, at least in the initial years of the rollout.

The Grand Canyon Institute, a bipartisan think-tank, recently did an analysis of what it would cost the state to expand the AHCCCS rolls.

The report concluded that if the state continued with its current policy of rolling back AHCCCS coverage, it would cost the state $856 million between fiscal year 2014 and fiscal year 2017. In return, the state would receive about nearly $2.8 billion in federal dollars.

But if the state went forward with the expansion, it would cost the state about $1.5 billion—but in return, the state would receive nearly $8 billion in federal dollars.

Under the first scenario, the state would be able to provide insurance coverage to about 228,000 people. Under the second scenario, nearly 435,000 would get insurance.

On top of that, the Grand Canyon Institute's report forecasts that the expansion would create 21,000 jobs and increase economic growth in the state by nearly 1 percentage point.

George Cunningham, a former state lawmaker who serves on the board of the Grand Canyon Institute, says the state would be foolhardy to reject the expansion.

"Any scenario that gives you a five-to-one return on your investment is fantastic," Cunningham says.

State Rep. Steve Farley of central Tucson, who will be moving up to the state Senate next week, calls rejecting the expansion of AHCCCS "just so profoundly stupid from every economic standpoint."

Farley says that the state's hospital and clinics have been under great financial duress since Brewer rolled back AHCCCS eligibility. Because fewer Arizonans have health insurance, hospitals have not been paid to treat them.

And adding to the impact on hospitals in the future: The health-care reform act reduces the money available to hospitals to treat uninsured patients because the law is designed to ensure that more people have insurance.

UA economist Marshall Vest says that the state would get a big economic boost if it expanded the AHCCCS population and captured the federal dollars.

Vest says that "for very little additional dollars, you could bring in a ton of additional federal dollars. The best thing that the Legislature could do for the economy would be to accept the additional money from the feds. It would be huge not only for the hospitals but for businesses as well. Everybody comes out a winner by having more federal dollars in here."

But those economic arguments appear to have little sway over Republican lawmakers at the Capitol. Ethan Orr, who will next week be sworn into his seat representing Tucson's north side in the House of Representatives, says there's little appetite for expanding the threshold to 133 percent of the federal poverty level.

Orr says he opposes the expansion not on ideological grounds but because he fears the state can't afford the bill.

"I don't think it's wise move financially," says Orr, who expresses disappointment that the federal government wasn't willing to provide Arizona with same level of matching funds if the threshold was restored to 100 percent of the FPL.

Cunningham says that a lot of the opposition is on ideological grounds because some GOP lawmakers are hostile to the idea of additional spending, dislike the notion of expanding services for low-income Arizonans and want no part of implementing the Affordable Care Act.

"Even if it didn't require a $500 million investment and the federal government said, 'We'll just finance it all, but you have to expand Medicaid to 138 percent of the federal poverty level,' they would say, 'No, we don't want to do it,'" Cunningham says. "They do not believe there should be any government expansion in anything, whether it be education or health care or social services."